After several delays, the Federal Reserve Board has approved Capital One’s request to purchase ING Direct and ShareBuilder. This deal has been in the works for a while. When ING Direct’s parent company was bailed out, the Dutch government gave the condition that it must divest its business in the United States. Several buyers courted ING Direct, and rumors circulated until the announcement that Capital One was the winning bidder in the summer of 2011.
Update: As of February 2013, ING Direct is known as Capital One 360. Here is a review of the Capital One 360 savings and checking account.
Capital One is considered a financial holding company, and this wouldn’t be the first time the company has grown through acquisition. Capital One has purchased Chevy Chase Bank and North Fork Bank recently.
The Federal Reserve gave the public a significant amount of time to comment on the proposed acquisition. In its forty-page decision, the Fed noted that a “large number of commenters supported the proposal,” while a “significant number of commenters opposed the proposal.” Many on the opposition cited Capital One’s parallel plans to purchase sub-prime credit card assets from HSBC, as well as Capital One’s record in lending to minorities and small businesses.
Regardless of the concerns, the Federal Reserve has given the green light to Capital One to move forward. I’ve been a long-time customer of ING Direct and ShareBuilder, and I’m taking a wait-and-see approach. I’m not ready to switch banks yet, but over the last few years, ING Direct’s record in offering a high-yield savings account has been overshadowed by other banks offering higher interest. I don’t waste my time chasing interest rates, so despite its sub-par interest rates, I’ve kept most of my business and personal cash at ING Direct, including my emergency fund.
Judging from comments by readers and others in the financial community, Capital One and ING Direct have vastly different reputations. Capital One’s is based mainly on customer services within its credit card businesses, while ING Direct’s is based mainly on those of us who discovered the online bank when it was leading its competitors with high interest rates for its popular Orange Savings Account.
It’s unclear what will happen to ING Direct and ShareBuilder in the future. Capital One has pledged to bring more features to ING Direct account holders, like full-service checking and ATM deposits. These features may be appreciated by customers, but if they come at a cost of lowered interest rates and insufficient customer service, it’s unclear whether consumers will be pleased in the end. Capital One would also bring its suite of other banking products to ING Direct customers, like loans.
Are you a customer of ING Direct or Capital One Bank? What are your expectations for post-acquisition service?
Federal Reserve [pdf]
Updated February 8, 2013 and originally published February 15, 2012.